EDUFOCAL Limited is preparing to acquire land in exchange for new shares as it tries to repair a balance sheet burdened by debt, but shareholders will have to wait to learn the value of the property and how much of the company they may give up for it.

The transaction is at an advanced stage and could be completed in the fourth quarter, subject to final documentation and regulatory approvals according to the company’s June-quarter report. EduFocal also plans to convert some of its liabilities into shares, to reduce interest costs.

Chief Executive Officer Gordon Swaby declined to identify the land, its owner, or its valuation. He also would not say how many shares EduFocal expects to issue for either transaction.

“The land-for-shares transaction is still being documented, and as a listed company we have to put the terms out to the whole market at the same time, through the JSE — not to any one party ahead of it,” Swaby told the Jamaica Observer.

“The number of shares, the implied price, and the resulting shareholdings will all be in the disclosure to the JSE once the transaction is executed. I won’t get ahead of that.”

But the missing terms are central to the deal. Issuing shares would allow EduFocal to acquire the land without spending cash, but it would also reduce existing shareholders’ percentage ownership. The company had 648.4 million shares in issue at the end of June.

EduFocal’s immediate problem is debt. It made $2.8 million in operating profit in the June quarter, but finance costs of $7 million turned that into a $4.3-million net loss. A year earlier, it had reported a $523,454 quarterly profit.

Revenue also fell sharply, dropping 60 per cent to $5.3 million from $13.2 million. For the first half of the year, revenue declined 55 per cent to $19.4 million, while the net loss widened to $4.0 million from $816,307.

Swaby said the weak quarter reflected new clients who had not completed onboarding, rather than the loss of existing business. The company bills much of its corporate work when agreed stages are delivered, so the new engagements had not yet produced revenue.

“Nothing moved out of the second quarter and nothing was deferred,” he said. “What happened in Q2 is that we were onboarding new clients, and that onboarding is not yet complete, so those engagements have not reached the point where they can be billed.”

Edufocal says its existing clients remain in place and that its Engage corporate learning service has approximately $10.8 million in annual contracted revenue. Swaby did not say when onboarding would be completed or how much revenue the new clients are expected to bring in.

So far, cost cuts have kept EduFocal profitable at the operating level despite the fall in sales. Administrative expenses for the first half declined 39 per cent to $9.6 million. Finance costs, though down from a year earlier, still exceeded operating profit by about $4.0 million.

That is the gap Swaby wants the debt conversion to close. He said the company would disclose which liabilities are involved, the terms, and the recipients of any shares, once the restructuring is documented.

At June 30, EduFocal had $265.8 million in borrowings and a $166.9-million deficit in shareholders’ equity. The proposed land acquisition would add a physical asset to a balance sheet on which software and other intangible assets account for about three quarters of total assets.

Meanwhile, shareholders should learn today whether the board has won the authority it sought to issue more shares. They voted at the September 10 annual general meeting on that proposal and a separate resolution to rename EduFocal ‘Walstron Limited’, and broaden its business beyond education technology. Both votes were taken by poll, with the results awaiting verification.

The share resolution drew objections at the meeting. Widebase Limited, EduFocal’s second-largest shareholder, argued that investors had not been given enough information to judge how much their holdings might be diluted, and called for the matter to be deferred or decided by a poll. The company proceeded with the poll.